Friday, August 17, 2012

Rail Shipping: Coal is Down; Oil, Cars & Lumber Up

Here's some interesting data from this week's report on U.S. rail traffic from the American Association of Railroads:1. On a year-to-date (YTD) basis through the week ending August 11, total rail volume of 9,005,952 carloads this year is down by 2.4% compared to last year's loadings of 9,231,927 carloads from January through mid-August.

2. Of the 20 different categories of carload shipments, coal totally dominates this type of rail shipping, and made up 44% of the shipping activity in 2011 from January to mid-August. This year, coal shipments represented about 41% of total rail car loadings.

3. Due in part to the switch from coal to natural gas for electric power generation, coal shipments by rail YTD in 2012 are down by 9.4%, from 4,075,000 carloads of coal last year to 3,693,000 this year from January-August.

4. If we take out coal shipments, rail carload volume is actually up by 3% this year for the other 19 categories, close to the 3.6% YTD increase in the intermodal form of rail shipping for trailers and containers (Note: intermodal shipments are not broken down by category).

Bottom Line: Coal shipments by rail exert a huge influence on overall rail carload volume because coal's share of total shipping by rail is so high (41-44%). Therefore, it's only because of the decline in coal shipments this year that overall rail carload volume has fallen. Take out coal shipments, and carload volume then shows a healthy 3% increase. Along with the 3.6% increase in intermodal volume, the overall increase in non-coal shipments this year presents a much more positive picture of the amount of inputs, raw materials, commodities, chemicals, vehicles, parts, products, etc. moving around the country, destined for some factory, plant, construction project or car dealership. And like I summarized yesterday, the three largest contributors to increased carload shipments so far this year are petroleum (+40.2% YTD), motor vehicles and equipment (+21.4%), and lumber (+12.2%).

So the economy's doing better than we thought once we exclude coal from carload rail shipments, and the environment's getting better because coal shipments to electric utilities are declining. And the petroleum, housing and auto industries are showing strong gains over last year for shipments of key inputs and outputs for those sectors.

Most of Dr. Perry's economic stats show excellent growth but I wonder if these are lagging, coincident or leading figures. I suspect that the railway figures are lagging because these deliveries were probably for orders months ago. But better if Dr. Perry can so designate their actual predictive value.

Ah yes, Zerohedge, The Most Dishonest Source of Economic Analysis on the Internet.

As usual, Zerohedge is not interested in context"Indeed, the seasonal factor has generally been negative in July for the past 10 years. We saw a similar phenomenon of a large July upward seasonal adjustment in restaurant hiring in nonfarm payrolls. What seems to be occurring is that the seasonal factors were abnormally large in the negative direction earlier in the year to compensate for the impact of the unusually warm winter, i.e., spending and hiring occurred earlier than usual because of the warm winter.

Since seasonal factors have to cancel each other out over the year, there has to be a period of abnormally large, positive adjustments in the summer. This is no conspiracy; it is simply a reflection of shifting seasons and economic behaviour, but it does complicate reading the tea leaves."

Ah yes, Zerohedge, The Most Dishonest Source of Economic Analysis on the Internet.

I just find it funny. When the NSA numbers were trending upward, some negative nancys were citing falling SA numbers. Now that the SA numbers are rising and the NSA numbers are going through their typical summer weakness (yes, economic activity slows during the summer months BECAUSE OF VACATION TIME. This is a well documented thing) suddenly the SA numbers can't be trusted. And yet, Dr. Perry and I are accused of cherry-picking data.

I'm not saying everyone does that. Bart and Morganovich constantly provide good and valuable analysis (but they are just grumpy old men :-P ).

I just find it funny. When the NSA numbers were trending upward, some negative nancys were citing falling SA numbers. Now that the SA numbers are rising and the NSA numbers are going through their typical summer weakness (yes, economic activity slows during the summer months BECAUSE OF VACATION TIME. This is a well documented thing) suddenly the SA numbers can't be trusted. And yet, Dr. Perry and I are accused of cherry-picking data.

Isn't it the other way? Dr. Perry was citing numbers in the early part of the year that were SA to account for the cold weather that did not exist. He assumed that the better numbers were real and reflected an improvement in the economy. But all that happened was that the warm winter stole sales from the summer months.

Let me be very clear here. I don't like the idea of reporting strong trends to get everyone dumb and happy about what it is going on only to quietly restate the numbers later so that the current period 'adjustment' can make the economic activity look better than it is. The dislike is not on moral grounds because the fraud is transparent enough for anyone with an IQ over 80 to see what is going on. (Although some might argue that the very high IQ people will be fooled much more easily.) It is a practical matter with me because as the practice is exposed everyone will turn out to be as cynical as the realists are.

Well yeah, besides the obvious disadvantages already mentioned, there's this from the article:

"You hardly notice an electric car engine sound, this is a feature everyone loves about them."

Ask pedestrians and cyclists how they like not being able to hear these stealth cars coming. Statistics show that twice as many pedestrians and cyclists are injured by Priuses than by any other single model.